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The incidence of nominal and real wage rigidity: An individual-based sectoral approach. National Bank of Belgium Working Paper, No. 191, June 2010

Messina, Julian and du Caju, Philip and Duarte, Claudia Filipa and Hansen, Niels Lynggard and Izquierdo, Mario. (2010) The incidence of nominal and real wage rigidity: An individual-based sectoral approach. National Bank of Belgium Working Paper, No. 191, June 2010. [Working Paper]

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    Abstract

    This paper presents estimates based on individual data on downward nominal and real wage rigidities for thirteen sectors in Belgium, Denmark, Spain and Portugal. Our methodology follows the approach recently developed for the International Wage Flexibility Project, whereby resistance to nominal and real wage cuts is measured through departures of observed individual wage-change histograms from an estimated counterfactual wage-change distribution that would have prevailed in the absence of any rigidity. We evaluate the role of worker and firm characteristics in shaping wage rigidities. We also confront our estimates of wage rigidities with structural features of the labour markets studied, such as the wage bargaining level, variable pay policy and the degree of product market competition. We find that the use of firm-level collective agreements in countries with rather centralised wage formation reduces the degree of real wage rigidity. This finding suggests that some degree of decentralisation within centralised countries allows firms to adjust wages downwards, when business conditions take a turn for the worse.

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    Item Type: Working Paper
    Uncontrolled Keywords: Wage rigidity; wage-bargaining institutions.
    Subjects for non-EU documents: Countries > Portugal
    Countries > Belgium
    Countries > Denmark
    EU policies and themes > Policies & related activities > employment/labour market > employment/unemployment
    Countries > Spain
    EU policies and themes > Policies & related activities > employment/labour market > industrial/labour relations
    EU policies and themes > Policies & related activities > economic and financial affairs > business/private economic activity
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > National Bank of Belgium (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 02 Aug 2010
    Page Range: p. 28
    Last Modified: 15 Feb 2011 18:33
    URI: http://aei.pitt.edu/id/eprint/14457

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